Dashed hopes: McGuire v the Secretary of Justice

In New Zealand, costs are awarded on a scale to the party who succeeds in litigation but only if that party is represented. McGuire v the Secretary of Justice [2018] NZSC 50 dashed hopes for an end this rule (what is called the “primary rule” in the case), which would have brought New Zealand to the more principled position of having all successful parties entitled to costs, regardless of representation. The New Zealand Bar Association, an intervener in the case, even argued the primary rule should be abrogated but they did not prevail.

McGuire also continues the embarrassing and unprincipled “lawyer in person exception” to the primary rule. This exception says that while most litigants in person cannot recover costs, if they also happen to be a lawyer they can recover costs. The New Zealand Law Society (also intervening) argued to uphold the primary rule but even they did not support the lawyer in person exception. They also failed.

The Supreme Court instead upheld the suite of rules that currently exist, a position neither party and neither intervener supported. So our current rules stand – the only litigants entitled to costs are: litigants who employ a lawyer, litigants who are lawyers, and litigants who instruct a lawyer they employ in their firm or department e.g. in-house counsel. The Supreme Court concluded that if any variation was to occur, it needed to come from law reform, not the courts.

One ray of sunshine in this disheartening judgment was Ellen France J’s decision, which while not varying from the conclusion that it was properly a matter for a law reform process, did observe:

It is difficult to see why a solicitor who brings a proceeding challenging a decision of a government department should be treated differently for costs purposes than, say, a chartered accountant bringing the same proceeding. If opportunity costs are seen to be the rationale then, in both cases, the plaintiff would incur the opportunity cost of his or her time [91].

It is indeed difficult to see a reasonable justification for the lawyer in person exception. This has not stopped various rationales being put forward however, which are traversed in Joint Action Funding Ltd v Eichelbaum [2018] 2 NZLR 70:

It is possible to quantify costs where a lawyer in person carries out the work but not a non-lawyer in person carries it out (Joint Action at [6] and [10]). Answer: This reason is irrelevant in the context of the New Zealand rules where, unless indemnity costs are claimed, costs are calculated by reference to the importance and complexity of the proceeding, not the actual amount spent.

There is a “public benefit” to the exception because the unsuccessful opposing litigant will have a reduced bill of costs if the lawyer in person succeeds (Joint Action at [7]). Answer: There is no public benefit here, only a private benefit accruing to the unsuccessful party. It also rests on an assumption that if the lawyer in person exception did not exist then “a solicitor who is party to an action would always employ another solicitor”. This relies on a simplistic understanding of why people, including lawyers, appear in person.

Lawyers in person apply professional skill that non-lawyers in person cannot bring to the process (Joint Action at [6] and [16]); the Supreme Court in McGuire (with the exception of Ellen France J) uses this justification [82]). Answer: This is based on an erroneous assumption that all lawyers are equally skilled and careful practitioners. Lawyers have a range of skills and only a small portion of New Zealand’s lawyers have the skills to run High Court civil litigation. (The history of Mr McGuire’s litigation outlined in the early part of the judgment, I would suggest, supports this proposition). While other lawyers have general legal skills that might support their ability to run a High Court case, so too might lay people who could have skills ranging from legal executives to business people. The legal profession has become highly specialised and the lawyer in person exception ignores this fact, treating anyone with a law degree as having the same set of skills. It also ignores the fact that some of most notorious persistent litigants have also been lawyers; in both New Zealand and England, the first people to be declared vexatious were lawyers.[1]

There is also the point that the exception just looks really bad. The lack of robust justification for the exception exposes the profession and judiciary to accusations of protectionism. This feeds the impression already held by some litigants in person, that there is bias against litigants in person. That is not a good thing for an institution whose legitimacy lies at least in part in its perceived neutrality.

While the lawyer in person exception is particularly problematic, a much more principled rule would be that everyone who successfully argues a case in court should be entitled to costs, regardless of what type of degree they have and indeed, regardless of whether they have a degree at all. Any other rule creates the kind of mess that we currently find ourselves in.

The Supreme Court dodged dealing with the issue on the basis that it was a law reform matter. Their conclusion that it was a law reform matter was in no small part because the Rules Committee had managed to complicate things by putting the lawyer in person exception into the rules of both the District Court and the Family Court, but not the High Court. The Supreme Court were concerned that if they knocked over the lawyer in person exception, this would create a wee bit of a mess (albeit an easy one to mop up) (at [86]). They also put quite a bit of emphasis on the fact the Rules Committee had considered both the primary rule and the lawyer in person exception but had left it unchanged and had concluded “this area should be effected only by primary legislation” (at [64], [86]). Quite why the Rules Committee thought this is unclear. While the Supreme Court is at pains to paint the primary rule as being of great historical lineage (even footing an almost incomprehensible quote from the Statute of Gloucester 1278 (at [56] and again at [63])), it is a rule of the common law in New Zealand so primary legislation seems unnecessary . Indeed, the Supreme Court suggested that reforming the rules “is probably within the competence of the Rules Committee” (at [88]).

It is just a shame that in sending the question of reform off to the Committee, they did not provide a stronger suggestion that reform is overdue. They did suggest that empirical evidence might be helpful in the process, so the Rules Committee can expect a letter from me soon. It is also heartening that the NZBA backed reform, and to a more limited extent, so did the NZLS. I have to live in hope –progress might yet be made.